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Exam 14: Property Transactions: Capital Gains and Losses, 1231, Recapture Provisions

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Question 71

Multiple Choice

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Which of the following would not be included in the netting of § 1231 gains and losses?

A) Personal use property net casualty gain.
B) Section 1231 loss.
C) Section 1231 gain.
D) All of the above.
E) b.and c.

F) A) and C)
G) B) and E)

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Question 72

Multiple Choice

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Tan, Inc., has a 2012 $50,000 long-term capital gain included in its $185,000 taxable income.Which of the following is correct?

A) Tan will benefit from an alternative tax on net capital gains computation.
B) Tan's regular tax on taxable income will be the same as its tax using an alternative tax on net capital gains approach.
C) Tan's $50,000 net capital gain is not taxable.
D) Tan's regular tax on taxable income will be greater than its tax using an alternative tax on net capital gain approach.
E) None of the above.

F) A) and D)
G) A) and B)

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Question 73

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In early 2011, Wendy paid $66,000 for an option on a parcel of land she intended to hold as an investment.After a survey of the land (paid for by the grantor) determined that the parcel was much smaller than the grantor said it was, she let the option lapse when it expired in 2012 after 14 months.How should Wendy treat these events in 2011? 2012?

An individual has a $20,000 § 1245 gain, a $15,000 § 1231 gain, a $13,000 § 1231 loss, a $3,000 § 1231 lookback loss, and a $15,000 long-term capital gain.The net long-term capital gain is:

Robin Corporation has ordinary income from operations of $30,000, net long-term capital gain of $10,000, and net short-term capital loss of $15,000.What is the taxable income for 2012?

Ryan has the following capital gains and losses for 2012: $6,000 STCL, $5,000 28% gain, $2,000 25% gain, and $6,000 0%/15% gain.Which of the following is correct:

To compute the holding period, start counting on the day the property was acquired and include the day of disposition.

Which of the following statements is correct?

A business taxpayer sold all the depreciable assets of the business, calculated the gains and losses, and would like to know the final character of those gains and losses.The taxpayer had $353,000 of adjusted gross income before considering the gains and losses from sale of the business assets.The taxpayer had unrecaptured § 1231 lookback loss of $12,000.What is the treatment of the gains and losses summarized in the chart below after all possible netting and reclassification has been completed? What is the taxpayer's adjusted gross income? (Ignore the self-employment tax deduction.)

Red Company had an involuntary conversion on December 23, 2012.The machinery had been acquired on April 1, 2010, for $49,000 and its adjusted basis was $14,200.The machinery was completely destroyed by fire and Red received $10,000 of insurance proceeds for the machine and did not replace it.This was Red's only casualty or theft event for the year.As a result of this event, Red initially has:

Section 1231 property includes nonpersonal use property where casualty losses exceed casualty gains for the taxable year.

Which of the following assets held by a cash basis accounting firm is a § 1231 asset?

The chart below describes the § 1231 assets sold by the Ecru Company (a sole proprietorship) this year.Compute the gain or loss from each asset disposition and determine the net § 1231 gain treated as long-term capital gain for the year.Assume there is a § 1231 lookback loss of $4,000.

When an individual taxpayer has a net long-term capital gain that includes both 25% gain and 0%/15% gain, which of these gains will be taxed first when the alternative tax on net long-term capital gain method is used and what difference does it make?

Rental use depreciable machinery held more than 12 months is an example of a § 1231 asset.

Siva operates a retail music store as a sole proprietorship.Which of the following items are capital assets in the hands of Siva?

Suzy purchased vacant land in 2005 that she subdivided for resale as lots.All 10 of the lots were sold during 2012.The lots had a tax basis of $9,000 each and sold for $45,000 each.Suzy made no substantial improvements to the lots.She acted as her own real estate broker; so there were no sales expenses for selling the lots.Which of the following statements is correct?

Section 1231 applies to the sale or exchange of business properties, but not to personal use activity casualties.

Which of the following comparisons is correct?

Tom has owned 40 shares of Orange Corporation stock for five years.He sells the stock short for a total of $1,100.One month later, he closes the short sale by purchasing and delivering 40 shares of Orange Corporation stock for a total of $600.Tom has a $500 short-term capital gain.